IFMP Stock Brokers Certification (SBC), Pakistan flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Primary market

The segment where securities are issued and sold for the first time by a company or government to raise capital, with proceeds going to the issuer rather than to a selling investor.

Secondary market

The segment where already-issued securities are traded among investors, providing liquidity and price discovery while the issuing company receives no new funds from those trades.

Money market

The market for short-term debt instruments maturing within one year, such as treasury bills and commercial paper, used mainly for liquidity and cash management.

Price discovery

The process by which buyers and sellers interacting in a market establish the prevailing price of a security through the continuous matching of bids and offers.

SECP

The Securities and Exchange Commission of Pakistan, the statutory regulator of the country's capital market, responsible for licensing intermediaries and enforcing securities law.

Securities Act 2015

Pakistan's core capital market statute governing public offers of securities, licensing of market intermediaries, insider dealing, market manipulation, and related enforcement powers.

Frontline regulator

A self-regulatory body such as a stock exchange that supervises its own members' conduct and trading activity under the oversight of the statutory regulator.

Insider trading

Trading in securities while in possession of unpublished price-sensitive information, or communicating such information to others who trade on it, which is prohibited.

Prospectus

A formal disclosure document filed with the regulator for a public offer, setting out the issuer's business, financials, risk factors, and use of the proceeds.

Initial public offering

The first sale of shares by a previously unlisted company to the public, accompanied by a prospectus and followed by listing of the shares on an exchange.

Rights issue

An offer of new shares to existing shareholders in proportion to their holdings, usually at a discount, protecting them against dilution of their ownership percentage.

Book building

A price discovery method in which institutional investors submit bids within an indicated price band, and the final offer price is set from the resulting demand.

Underwriting

An arrangement in which a party agrees, for a fee, to subscribe for any shares left unsold in an issue, thereby transferring subscription risk from the issuer.

Limit order

An order to buy or sell a security at a specified price or better, giving price certainty but no guarantee that the order will be executed.

Market order

An order to buy or sell immediately at the best available prevailing price, giving execution certainty but leaving the final price uncertain.

Circuit breaker

A regulatory mechanism that halts or restricts trading in a security or the whole market when prices move beyond a prescribed threshold within a defined period.

T+2 settlement

A settlement convention in which the securities and cash obligations arising from a trade are discharged two business days after the trade date.

Clearing

The post-trade process of confirming transactions, netting offsetting obligations, calculating each member's dues, and managing margin before settlement occurs.

Central counterparty

An entity that interposes itself between trade counterparties, becoming buyer to every seller and seller to every buyer, thereby reducing counterparty risk.

Multilateral netting

The offsetting of a member's buy and sell obligations across many trades in the same security to produce a single net delivery and payment position.

Settlement guarantee fund

A pooled reserve maintained by the clearing house from member contributions, used to complete settlement when a member defaults on its obligations.

Delivery versus payment

A settlement mechanism linking the transfer of securities and the transfer of cash so that delivery occurs only if payment occurs, eliminating principal risk.

Central Depository Company

Pakistan's central depository, which holds listed securities in electronic book-entry form and records transfers, pledges, and corporate action entitlements.

Sub-account

A unique investor-level account maintained under a broker's central depository account, identifying the securities beneficially owned by that individual client.

Short delivery

A settlement failure in which the selling member does not deliver the required securities on settlement date, triggering buy-in or cash compensation procedures.

Settlement risk

The risk that one party to a transaction fails to deliver securities or cash on the settlement date, potentially causing loss or liquidity strain to the counterparty.

Record date

The date on which holdings are determined for entitlement to a corporate action such as a dividend, bonus issue, or rights allocation.

Know your customer

The identity verification and due diligence process a broker must complete, covering beneficial ownership, source of funds, and risk profile, before activating a client account.

Segregation of client assets

The requirement that client cash and securities be held separately from the broker's own assets, protecting clients if the broker becomes insolvent.

Contract note

A written confirmation issued by a broker to a client for each executed trade, showing the security, quantity, price, charges, and settlement date.

Investor Protection Fund

A compensatory fund maintained under regulatory rules to reimburse eligible investors for losses arising from broker default, fraud, or misappropriation, within prescribed limits.

Capital asset pricing model

A model stating that expected return equals the risk-free rate plus beta multiplied by the market risk premium, used to estimate required equity returns.